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Experiments on Agenda Setting, Bracketing, Power, and Responsibility Exchange in Bargaining

Paper Session

Saturday, Jan. 7, 2017 7:30 PM – 9:30 PM

Hyatt Regency Chicago, Michigan 2
Hosted By: American Economic Association
  • Chair: Emin Karagozoglu, Bilkent University

Persistence of Power: Dynamic Multilateral Bargaining

Marina Agranov
,
California Institute of Technology
Christopher Cotton
,
Queen's University
Chloe Tergiman
,
Pennsylvania State University

Abstract

We study a dynamic divide-a-dollar game, in which a committee decides how to allocate scarce resources between its members. Committee members have conflicting interests and bargain repeatedly over an infinite number of rounds. The repeated nature of the game creates links between bargaining decisions across rounds. We focus on institutional rules that govern the transition of the agenda setter’s power across rounds, and study, both theoretically and experimentally, how these rules affect bargaining outcomes and the coalition formation process. Specifically, we consider two rules that permit persistence of agenda setter power. The first rule allows successful agenda setter to hold onto the power; this rule can be interpreted as the vote of confidence attached to each budget vote. The second rule dictates that keeping power requires an agenda setter to maintain the support of a legislative majority in order to keep power following the passage of a budget allocation. We implement both rules in a controlled laboratory experiment and compare observed outcomes with the predictions of stationary SPE, the most commonly used refinement in the theoretical literature. Our experimental results show that in contrast to the prediction of the stationary SPE, both rules give rise to stable and persistent coalitions, both in terms of coalition size and shares of coalition partners. Furthermore, other characteristics of observed outcomes are largely inconsistent with the stationary SPE predictions. To reconcile theoretical and experimental results we explore the set of bargaining outcomes that can be supported as SPE with a threat of exclusion from future coalitions. Overall, our theoretical and experimental results show that the equilibrium concept typically used in one-round of bargaining may not be as well suited for repeated bargaining environments. Our results also suggest the importance of exploring rules that govern the transition of power in dynamic bargaining games.

Bargaining Power and Endogenous Surplus: An Experimental Study

Geoffrey Clarke
,
Rutgers University
Barry Sopher
,
Rutgers University

Abstract

This paper reports the results of a bargaining model that provides agents with a choice between production and protection in a setting with a winner-take-all disagreement point, and then examines this model by conducting a laboratory experiment. Using different endowments and different contest success functions, we find that most agents over-invest in preparing for disagreement. Additionally, we find that many agents compromise rather than engage in conflict, even when it is more profitable to do so.

Responsibility Exchange Theory: A Theoretical Model of Thanking, Apologizing, Bragging, and Blaming

Shereen Chaudhry
,
Carnegie Mellon University
George Loewenstein
,
Carnegie Mellon University

Abstract

Judges anecdotally report that many of the small claims disputes that are brought before them have as a key feature that one party to the dispute either failed to apologize for an adverse outcome or failed to thank for a favorable outcome. Indeed, alternative dispute resolution strategies that encourage communication and "early apology" before conflicts move to the courtroom can help boost the number of cases that avoid litigation (Sohn and Bal, 2012). Studies of medical malpractice suits find that an apology from the physician, which is mostly thought to lead to increased liability, can actually significantly reduce settlement amounts and the time in which settlements are made (Ho and Liu, 2011). Furthermore, the majority of aggression in the workplace is of a verbal, subtle kind termed "incivility" (Baron and Neuman, 1996; Andersson and Pearson, 1999), which includes neglecting to say thank-you, and more serious forms of aggression are almost always preceded by such acts of incivility. In this paper, we introduce and test a theory to explain why apologies and expressions of thanks are so important in these types of interactions. Additionally, the theory draws a close connection between apologizing and thanking on the one hand, and blaming and bragging (that is, taking credit for one one's own positive action) on the other hand. We test the theory using a variety of methodologies including qualitative interviews, hypothetical scenario studies, and experimental negotiations.

When the Going Gets Tough or Easy in Bargaining

Simon Gaechter
,
University of Nottingham
Emin Karagozoglu
,
Bilkent University
Arno Riedl
,
Maastricht University

Abstract

Same economic actors periodically bargain over the division of resources. The value of the stake in these negotiations almost never remains constant over time. In contexts that involve periodic negotiations (e.g., contract negotiations), reference points based on performance and precedents, and exogenously/stochastically varying stakes, should economic actors bargain over the whole pie or should they bargain over the amount of change with respect to the old pie size? Moreover, do subjective entitlements and/or bargaining behavior/outcomes differ when negotiations are made over losses rather than gains? In order to answer these questions, we use a 2X2 experimental design, where the size of a bargaining pie (stochastically) changes compared to its status quo level and we investigate the influence of bracketing (narrow or large) on the one hand, and the issue at stake (gains or losses) on bargaining parties' ’entitlements and bargaining behavior. Our experimental design uses an unstructured bargaining protocol, which allows us to study opening offers, concession behavior, duration, and agreement terms. For both manipulations, we observe systematic effects on subjective entitlements, opening proposals, and agreements. Most interestingly, narrow bracketing leads to agreement payoffs even more asymmetric than what the reference point implies and it favors those players who were already favored by the reference point present in the environment.
Discussant(s)
Guillaume Frechette
,
New York University
Gary Bolton
,
University of Texas-Dallas
Rami Zwick
,
University of California-Riverside
Ernesto Reuben
,
Columbia University
JEL Classifications
  • C7 - Game Theory and Bargaining Theory
  • C9 - Design of Experiments